The latest WTO statistics say that world trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world. A resilient supply chain is essential to ensure a strong global trade.
Our survey on the impact of COVID-19 pandemic on the supply chain industry revealed how vulnerable the industry was with the results showing that 35% of the market was totally unprepared for it and 59% of the market was severely impacted by it.
Based on these results, on the 4th of June 2020, we organised a Webinar sponsored by Ocean Insights on how the future of global supply chains would look.
This webinar, hosted by Eric Johnson, Senior Technology Editor of the JOC featured Steve Kranig of IM-EX Global, Inc., Pritam Banerjee of Asian Development Bank and Robin Jaacks of Ocean Insights as panelists.
For those of who missed out on this insightful and informative webinar, here is a synopsis of what was discussed.
Main challenges in implementing technology
While technology can be a great enabler of supply chains and can help in saving time and money, there are a few challenges in its implementation.
Steve opines, “One of the main challenges is the gap between an experienced older generation and a very young, bright, tech-enabled and tech-dependent generation that sometimes doesn’t see eye to eye on the methodology of using the available tech. If this gap is narrowed, the implementation would be much quicker.”
Global logistics is inherently a multi-party challenge and in order for some of the technologies that are in the market to be fully leveraged, data sharing is important.
As per Pritam, one of the main issues in a data-sharing ecosystem is that of “trust” and because it involves a large number of players there is a question of who will solve that trust issue.
In some cases, the firm that is trying to create the ecosystem with all the suppliers and partners has taken the lead and it works to a certain extent. In other cases, it might be the government taking on a neutral role, as the Singapore Government has done with its NTP (Networked Trade Platform).
There may be projects like Port Community Systems which may be developed by competition but data-sharing is required as part of the project and this could lead to a conflict of interests.
Data sharing is a sensitive issue that the role players have to get around and agree on – the roles of each party in the whole ecosystem have to be defined.
In terms of data sharing and data standardisation, the maritime industry lacks a formal body (like IATA for Air Freight) that sets the right standards for the industry to adopt.
Data standards for the maritime logistics sector
There has always been a question of whether the maritime logistics industry will be able to create an organically developed set of standards based on effective commercial solutions or will it depend on an independent kind of inter-governmental body that will set standards for the industry to adopt.
Here again, with certain specific sub-segments of logistics, the whole trust issue comes into play as far as the extent to which the players in that system trust each other to drive this standardisation as a commercial exercise.
This could require neutral players to come in and do the standardisation for the industry either in a regulatory fashion or based on a self-regulatory industry body.
Because the maritime logistics sector is more varied with many different models compared to the air freight sector, it is a bit more difficult for it to be standardised in comparison.
There is also the factor of overvaluation of proprietary information when it comes to data sharing because a lot of the role players in the supply chain industry have a tendency to overvalue their data, probably without realising that their data is only valuable in the right context.
For example, AIS (Automatic Identification System) data for the position of the vessel or container tracking data may not be as valuable when looked at it in isolation but when it is used in the context of visibility and tracking, then it becomes valuable.
Because there are so many role players in the maritime supply chain, one company with their data alone will not be able to make as much sense as a set of companies with data sharing that provides the full picture to the customer, which is the ultimate objective.
Steve Kranig says, “while data sharing will be necessary to help in identifying issues like predictability, problems on any specific trade lanes, delays etc, some of the information like client information, costing etc should remain private and is not shared or openly available to everyone”.
Role of ancillary systems in logistics
Although many BCOs (Beneficial Cargo Owners – or shippers) and OTIs (Ocean Transport Intermediaries – like NVOCC or Freight Forwarder) have their own legacy systems, ancillary systems also have a role to play relative to these other systems.
Robin said, “In terms of investment in ancillary systems, API (Application Programming Interface) is the buzzword of the day and the interface that is making all of these systems work together.”
“There are many systems (like the legacy systems) who had to provide multiple services in order to be able to maintain their client base.
But with new developments in technology, it is also possible for specialised data service providers like Ocean Insights to provide specific services like Ocean visibility to a broad range of customers, opening the way for specialised vendors in this market.”
Automation in the industry
In light of the new challenges we are facing with COVID-19, working from home and social distancing, etc., the industry also needs to understand how fully it can be automated to perform the end to end movement of physical goods in the maritime sector.
In terms of automation, it is much easier to automate repetitive processes such as documentation as compared to certain operational aspects, which will still need human intervention.
But along with automation, also comes the fear from many in the industry that they will lose their jobs to a computer, especially in big industries like trucking.
Removing people or operators out of the equation is not going to happen in the foreseeable future because even with legacy systems, the operating software needs to be able to make decisions which require deep integration.
As per Robin, in fact, when working with a manufacturing company to create a virtual warehouse, they were able to create a mechanism which identified when specific containers were going to arrive, what they contained, notified them when inventory reached a certain threshold and artificially lowered that threshold in order to save inventory costs.
All this was done without killing any jobs and while making the jobs of the people already working in that company much easier.
Of course, people also need to equip themselves with advanced sets of skills in dealing with automated processes and technology as not everyone can be elevated to strategic value-added roles in the new technological environment.
Apart from the private sector, several governments have also taken it on priority to usher in automation in the logistics sector and prioritise asset automation. For example, the role of a picker in a warehouse operation has suddenly become much clearer when they were unavailable due to COVID-19.
But the priority of governments is more in the automation of the processes rather than driving automation in operations and a classic example of this would be the movement of paper between various regulatory bodies for specific approvals.
Pritam says, “a lot of these processes are happening now as governments are genuinely concerned and want to have risk management systems, which can provide these approvals automatically, based on standardised guidelines and processes already set”.
Will global supply chains be reshaped in the future?
The catalyst for this discussion and many other discussions around the world has been the COVID-19 pandemic and a question utmost on the minds of many people is:
Do we expect global supply chains to be reshaped? Should we expect a production shift out of the factory of the world (presuming China or Asia in general) into more regional local production locations, as a way to minimize the risk of heavy dependency on one or few countries for them?
Pritam says there are several “fundamental economic reasons” why some production hubs are located in Vietnam, China whereas some others are based in South America.
“Even before COVID-19, for the past half a decade, the market has been moving production around for different reasons – tariffing, labour cost including new technologies automation, 3D printing – all of which enables near sourcing.
The market is no longer willing to put all their eggs in one basket and where there is a huge concentration of a particular product from one region or factory there is a tendency to try and move away from that dependence.
So while there will be some movement towards regional and local production in the medium term, the world is not ready for a radical transformation in the short term” adds Pritam.
Tariffs and COVID-19 have become major catalysts in accelerating plans for companies who have been gravitating towards a “China plus one or two” as part of their sourcing strategy.
But supply chain resiliency also is a major factor to be considered – whether these other sourcing points can handle the sudden influx of demand.
How e-Commerce could help
This also brings into play, the role or surge in e-commerce, which also has a cost component to it especially if reverse-logistics is in play because the customer was not satisfied with the product or did not get the right product.
E-commerce is one area where the importance of data standardisation or data sharing has been shown to be effective because a lot of the e-commerce platforms have very good predictive models on what is sold in even small segments around the world.
The information available in these e-commerce systems can radically change the way different transport modes or supply chains behave.
No discussion around technology or automation will be complete without addressing the chronic gaps that exist in paper-based processes and legacy systems that even digital freight forwarders have not been able to address.
Through the discussions, it has become evident that most of the new digital platforms have been developed by replicating the processes already in use by legacy systems.
What the legacy systems were missing seems to be the accessibility of clear and visually appealing reports which the new technologies have brought to the forefront.
However, some of the things that the new systems cannot and have not replicated are the human relationship factor which plays a major role in supply chain like relationship building, dealing with various labour forces such as unions around the world, negotiations in those areas to keep world trade moving.
These relationships have been live over the years and these cannot be automated or digitized and whatever you call yourself, there will always be the need for people on the ground.
Which brings us to the topic of the type of skills that will be required in supply chain management compared to even the last 3 months in terms of ambitions and career goals for people looking to move up the chain in the logistics business.
The key takeaway from what is currently happening and with the evolution of data is that people need to be adaptable and upskilled in being able to read data and key skills like numeric skills need to be improved.
It is all well and good having various data points, but if you are unable to make sense of those data points, it would all be wasted.
At the same time, organizations also need to be able to better adapt and make use of human resources with some form of optimization in mind.
Organisations need to better equip their people to be able to match the interface that they see digitally and make that translation and connection with the data.
This will help the workers drive productivity into the right areas and ensure the future of global supply chains.